HBD All The Way

Saving May Not Be The Best Move

As I recently mentioned, I want to focus on financial security this year. And when you talk about financial security, you automatically think about "Savings". However? Well, I have no idea if that applies to everyone, but I think so. Although I don't have a fixed income, I could still save a little on average every month. Some months a little more than others, and sometimes none at all. But it is wise to do so anyway. At least, that is generally believed. But is that the case? Today, let's talk a little about the current reality of "Saving". And before you think I've gone crazy... Read on. Then you understand why I have my doubts about "Saving" in today's time.

ING Bank's Calculation

Today I received an email from the ING bank. I've had my checking account there for years, and now they made me a fantastic offer. I can just open a FREE savings account and then receive 1.50% interest on an annual basis up to an amount of 100,000 euros. The interest rate is variable, so it can change at any time. That aside, this was the current offering. You would think this is a nice offer, just a FREE savings account. The Dutch love the word FREE. But to be honest, this email set off all my alarm bells. Because if I think logically for a moment and take the average inflation of the past five years, I would lose a lot of money if I were to put 100,000 euros in a savings account with them with an interest of 1.50% per year. Even if I were to look at this every year I would be disappointed. If I were to simulate that I would have 100,000 euros to put in that FREE savings account, and therefore receive 1.50% interest from ING, I would have lost a lot after a year. The sum would be, after one year with an inflation of 3.9% and an interest of 1.5% on €100,000, my money has reduced in purchasing power to €97,650. Even though I would have earned a little interest, inflation still had a bigger impact on the value of my money. If I were to do this for just 3 years, assuming inflation and interest rates remain the same, then after 3 years my 100,000 euros would be worth only 92,856.75 euros.

The Interest

So in this case you can say that the interest you get is only a cloth to cover the bleeding. Yes, you get that interest, and that sounds very nice, but if you put it into perspective against the current inflation in the eurozone, it does not compensate at all, and you therefore lose a lot of money by passively putting your money in a savings account. to make. And all this while you know that the bank is indeed using your money to generate income in various ways. Some of the things banks do with your money are the following;

• Lending to Others: The most common thing is that banks use your money to lend it to other customers. This includes personal loans, mortgages, or business loans. The difference in interest (a borrower must pay a higher interest than the saver receives in interest) is a profit for the bank itself.
  
  

• Investment: Banks can also invest part of the savings in various assets, such as government bonds, shares, funds, and other financial instruments. These investments can help increase returns on money, although they also come with risks.
  
  

• Reserve Requirements: Banks have certain reserve requirements that they must maintain to meet regulatory standards. Part of the money in savings accounts is kept for this purpose. In this way, they also ensure sufficient liquidity to meet the daily needs of customers.
  
  

• Interbank loans: Banks lend money in or out, from and to other banks on the interbank market. This is done to bridge liquidity shortages or invest surplus funds.
  
  

-. Other Services: Finally, I would like to mention the products and services that banks offer, such as credit cards, checking accounts, and insurance. Your deposited savings can also be used for this.

As you can see, there are quite a few ways for banks to generate income with your money, and they will be very happy that the Dutch are generally saving people. The latest figures I could find show that. ING doubled its profit again in the third quarter: net profit amounted to almost 2 billion euros. The bank mainly benefited from increased interest income, especially from private customers.

So now back to the wonderful offer they have. Simply offer a FREE savings account with an interest rate of up to 1.50% per year. After seeing what happens to your savings in terms of value in just 3 years, and then the profit of ING. If you take this into account, then it is not a nice offer at all. And I think there are much better ways to build wealth.

Be Aware of Reality

Now I have to remain honest. I don't think saving is completely useless. On the contrary, it is always good to make sure you have money on hand. You never know what can happen and what major expenses you will unexpectedly have to deal with. Everyone knows, "Life sometimes throws some lemons". So in any case, I do think that a savings account is not superfluous, but here too you have to look around carefully and choose the savings account that is most advantageous for you. So it doesn't have to be the first option. There are savings accounts available where your interest rate is now 3%. So no, it's not that I'm against saving. And no, you don't have to put everything in an old sock, although it doesn't hurt to have cash for emergencies either. But you have to be aware of the reality. Your money becomes less valuable over the years due to annual inflation.

Invest Smart

So, what's the alternative? Invest smart. And I let everyone find out for themselves what smart investing is. I have made my plan for this year and that is that I want to achieve financial security. For that I have to work on both sides, income, but also assets, and yes... actually 3 sides. Spending is also something, but well, my expenses were not the highest because I don't have the income for that anyway. If I can increase my income and keep my expenses virtually the same, I will automatically build up capital. And I have to know how to handle that ability properly.

The Crypto Game: Risk vs. Reward

For me, that means that I certainly don't put everything I have in crypto. Crypto entails a lot of risk, but many opportunities for high returns. You must also be aware of reality and, above all, do not take unnecessary risks. The fact remains, the crypto world is not for the faint of heart, you have to invest a lot of time in it, you have to learn a lot about it, but then you have a CHANCE of a high return. Contrast that with the savings account where you get a fixed return (in this case a loss). Do your homework, be aware of inflation but don't lose sight of reality. Don't be too quickly seduced by a supposedly great offer, but don't be blinded by fat crypto profits either, because they are not guaranteed either.

Now you're probably wondering what my plan is, and well, I can only say that I have to work most on the income part, that's where I can make the most profit. Until this is properly arranged, I will not be able to save much. I am trying to grow my HBD as much as possible, and that is all I can say at the moment. For me, HBD is currently the best savings account!